As you know, variable rate mortgages, lines of credit and/or student loans are all based on the Prime Rate. Many of you might be asking should I lock in my variable rate mortgage?This is not an easy question to answer. Why? Because, just like when purchasing a property, everyone’s own personal situation is different.
Here are 3 main points to consider before you jump to action:
1. Your current variable interest rate
2. Your future goals and housing/mortgage plans, and
3. Your potential new fixed rate
Let’s explore these in more detail...
1. Your Current Variable Interest Rate
If you had a variable at around 2.1% to 2.5% over the past few months, and now you’re at 2.75% (on the high side), your situation is still looking pretty good!
If your variable rate has increased to 3.00% or over, you may want to think about locking in.
2. Your Future Goals and Housing/Mortgage Plans
Converting to a fixed term isn’t right for everyone as other factors are to be taken into consideration such as payment charge, income and future plans such as renovating, moving etc. Feel free to reach out and we can discuss what your new payment would look like, and also if it is suitable for you. There are two very good reasons why the variable is and has been a great choice:
3. Your potential new fixed rate:
When it comes to new mortgages, the interest rate you are able to get is predicated on whether you have an insured, insurable or uninsurable mortgage. Say what??
In the past, it was easier to quote a rate. The new government regulations make it a bit confusing to figure it out since there are different rate tiers for different mortgage products,types of income and credit score ranges.
The best rates are for insured mortgages ( less than 20% down payment, borrower pays for mortgage default insurance premium) and for a straight transfer from one lender to another.
Slightly higher rates are for “uninsurable” mortgages. An uninsurable mortgage is anything with 30 years amortization, or if the home is over $1M. Refinances are also “uninsurable” mortgages.
My Suggestion: I think if you are locking into a fixed rate and the new fixed rate is higher by 0.50%, it would probably not be in your interest to lock in…
However, if you feel uncomfortable with any increase in your mortgage payment due to increased rates, you’re not alone. Give me a call and we can discuss further.
Please don’t hesitate to contact me if you have any questions. Drop me a line at firstname.lastname@example.org or 647-893-2535
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